The same tax-free bond-financing available for manufacturers can be applied to infrastructure for housing development, Quad-Cities area economic developers learned Thursday.

The cost of building roads, curbs, water, sewers, and lighting, as well as retention ponds and land reserved for schools and parks, can be financed with tax-free bonds, providing those costs are for public purpose, Frank C. Paul, senior vice president of First Albany Corp.'s Chicago office, said Thursday.

Mr. Paul was featured speaker at a forum of mostly economic developers and city officials Thursday hosted by the Quad Cities Regional Economic Development Authority (QCREDA).

The authority is considering developing this latest financing tool to help housing developers in much the same way it helps finance manufacturers in its three-county area, QCREDA executive director Andrew Hamilton said.

Infrastructure costs typically account for 25 to 30 percent of a total project, Mr. Paul said. QCREDA's long-term, tax-exempt bond-financing usually saves a borrower 2 percent to 3 percent off conventional interest rates.

"This program has been long overdue, but now Rock Island, Henry and Mercer county real estate developers and contractors have a real cost-saving financial tool that should rekindle their interest in creating new housing subdivisions," said QCREDA chairman Ken Schloemer, who could not attend Thursday's gathering.

The financing tool would allow housing developers to use bonds to finance the parts of their project - such as streets, sewer, water and street lights - that would be turned over to a municipality. The rest of the subdivision development's cost could be financed through conventional bank financing.

By removing infrastructure costs from the total project, developers would save money and could pass along lower costs to potential home owners.

The program would also help cities, such as Rock Island, which agreed to make infrastructure improvements with the Mel Foster Co. to develop the Foxwood Addition in southwest Rock Island several years ago. The project did not stimulate the expected housing boom, but the Foster Co. has been repaying the loan to the city with proceeds from the lot sales.

After Mr. Paul's presentation, officials from Moline, East Moline and Rock Island and a local contractor indicated the QCREDA program had promise.

"It might have some application," said Greg Champagne, Rock Island's community and economic development director.

Craig Anderson, Moline's community development coordinator, said the city has used tax-increment financing and special-use districts among its financing options, but they have disadvantages since they are tied to property tax assessments. The city has some potential liability in those financing tools, he said.

"This seems to have advantages, probably depending on the specific needs of the developer," he said.

"Anything that will make that process more palatable and affordable is a step in the right direction," he said.

Home-rule communities can issue the same tax-exempt bonds as QCREDA, but the municipalities also would assume the same risk, Mr. Paul said. QCREDA would require developers to obtain a letter of credit from a bank.

Public-use projects no smaller than $1.5 million or $2 million would realize attractive interest rates and the cost savings of issuing the bonds, Mr. Paul said.

The authority would probably want to pool a number of smaller projects to realize the same economic advantages as larger bond-issuances, he said.

QCREDA and another economic development authority in the St. Louis area are the only two regional authorities of the four with powers to issue bond-financing with both state and federal tax-exemptions.

Mr. Paul has 20 years of experience as an investment banker. He specializes in economic development projects. He developed this variation of tax-free bond-financing for public-use infrastructure projects about seven or eight years ago for the state of Illinois.